The West Virginia Senate Finance Committee introduced a Senate-wide bill that would change the methodology for evaluating production from oil and natural gas wells, approving the changes the Judiciary Committee made to the bill to give the state tax department more leeway to reform the way it values wells over objections from the oil and gas industry.
The Senate Finance Committee gave the green light to House Bill 2581 with little discussion on Wednesday afternoon after the Judiciary Committee narrowly approved its revised version of the legislation on Tuesday.
School boards and county school boards across the state would have absorbed most of a projected $ 9 million loss in revenue stemming from the additional spending allowed by House Bill 2581 had it been passed as passed by the House of Delegates, according to the Tax Department.
But the Judicial Committee removed the language from the original version of the bill providing for a tax on net profit by defining the net proceeds for oil and natural gas as actual gross receipts based on sales volume less royalties and operating costs and including rental operations, lifting, compression, handling and transportation charges as annual operating costs.
A push for the bill was a 2019 state Supreme Court of Appeal ruling in which the court found in part that the Tax Department improperly imposed a cap on operating expense deductions. gas wells.
Leroy Barker, director of the Property Taxation Division of the Tax Department, said, when questioned by Senator Eric Nelson, R-Kanawha, that counties could be held liable in litigation if the Legislature does not better define its tax rules.
The latest version of the bill would still allow taxpayers who disagree with their property assessments to bypass county equalization boards and review and go directly to the Tax Appeals Office, lowering the standard of proof that a taxpayer must meet to obtain his property. reassessed from clear and convincing to a preponderance of evidence and eliminate appeals from assessment boards.
The bill would apply to assessment years beginning on July 1, 2022 and would come into force 90 days after its passage.
Acting State Commissioner Matt Irby told the Judiciary Committee that the department viewed the original version of the bill as deeply flawed and allowing taxpayers to essentially claim double credit for their spending.
House Delegate Dianna Graves, R-Kanawha, the bill’s main sponsor, and officials from the oil and gas industry criticized the Judicial Committee’s changes to the bill directing the Tax Department to propose rules for approval by a legislative rules review committee. Graves argued that the $ 9 million planned for local governments should be weighed against the tens of millions of dollars that counties will continue to collect from oil and gas property taxes. Graves argued that now would be an opportune time to pass the bill as it was originally designed, given the additional cushion counties have from the CARES Act coronavirus funding.
There is no estimate of what the current version of the bill would cost local governments. This figure would depend on the development of the rules of the Department of Taxation, although the burden on local governments should be less.